Fundamental analysis of IDFC First Bank

fundamental-analysis-of-idfc-first-bank

At first, I tell you about how IDFC Bank become IDFC First Bank.
In 2018, there was a merger of IDFC Bank with Capital First after which it was called IDFC First Bank.

History of IDFC Bank

It was set up in 1997 with the objective of financing for infrastructure. They used to do financing for private infrastructure projects for institutions. After 1997 comes a time of 2014 where RBI gives IDFC Ltd the license to become IDFC Bank. After which they diluted all their assets and liabilities to become a full-fledged bank. Wherein they become a bank in 2015 after the demerger of the infrastructure business. After starting operations in 2015, they realized that their focus was on the corporate side where they used to give loans to companies which were risky because if one defaults, it would be a huge loss for them.

After which they started focusing on the retail sector by penetrating many cities in India. And after their focus shifted to the retail sector, they thought of growing inorganically. When the company takes over or buys out other companies, they merged with Capital First and become IDFC First bank.

Capital First

Capital First as an NBFC, which used to lend debt to different entities like MSMEs and retail investors and generate income from interest and penetration was good. the capital First was started in 2012 whose CEO was V Vaidyanathan and they were trying to get a banking license earlier too.

IDFC bank’s Financials

As you can see above the image,
At first, we have talked about its gross assets which were 524 billion rs in 2016 were 753 billion rs in 2018. Its CASA was only 4 billion in 2016 which became 64 billion in 2018. And its net interest margin has remained around 2%. Its net worth was 136 billion in 2016 which was 148 billion in 2018.

Capital First’s Financials

capital-first-report

As you can above the image,
If we see the asset under management, they brought it from 97 billion to 326 billion from 2014 to 2018. Their ROE has been rising from 2014 till 2019 from 4.9% to 14.5% and their gross and net NPA was 1.6% and 1%.

Finanacials after merged

after-merged

As you can see above the image, the retail gross funded assets, in March 2018, it was only 70 billion which is now 667 billion. Their CAGR has been around 32% in the past 3 to 4 years meaning they have performed well. Earlier they had a problem of dependency on some borrowers due to which they started diversifying to distribute their dependency.

top-borrower

As you can see the image,
In March 2018, they had total assets of 18% of borrowers which they reduced to 6.3% in December 2020.

IDFC First Bank’s Quantitative analysis

IDFC-Frist-Bank's-Quantitative-analysis

AS you can see above the image,
We have compared IDFC Bank with HDFC, Kotak, ICICI, SBI, Axis bank, Induslnd bank. IDFC First bank is the smallest by market cap of 31000Cr. The next is P/B value, the lowest is of SBI followed by IDFC First bank meaning it is not much.

capital adequacy ratio

Banks like HDFC and Kotak are at 19% and 17%. Whereas IDFC First bank is at 14.3% which is the safe zone but still not much.

Net interest margin

It tells us the margin of interest received by the bank. IDFC First bank has a healthy net interest margin of 4.6% which is higher than other banks except for Kotak at 4.61%. Followed by HDFC at 4.1%, ICICI at 3.57%, SBI at 3.34%.

CASA ratio

CASA ratio is the most important for banks and a healthy number is above 40%. IDFC First bank is at 44.6% which is a healthy number as compared to others. The highest CASA is of Kotak at 57.1% whereas HDFC is at 43%. Every bank tried to keep their CASA above 40%. So that they can maintain a good interest margin.

NPA (non performing assets)

IDFC First bank’s gross NPA is not much at 1.33% whereas SBI at 4.7%, ICICI at 4.38%, HDFC at 1.08%, and Kotak at 2.55%. Meaning they have maintained a good NPA number. The net NPA, they are at 0.33%, HDFC at 0.17%, Kotak at 0.64%.

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